When considering the topic of structural change and what we should do to bring it about, consider the following facts.

• In 2009, total wages and salaries paid to employees in the U.S. (not including employer contributions for programs such as Social Security, Medicare, etc.) amounted to slightly more than $6.3 trillion.

• Total proprietors’ income (income of sole proprietors and non-incorporated businesses) amounted to just over $941 billion.

• Rental income of property owners adjusted for depreciation was nearly $306 billion.

• Interest income was just over $1.1 trillion.

• Income from dividends paid by corporations amounted to nearly $600 billion.

Adding these figures produces total income from all sources of $9.225 trillion.

For the same year (2009 is the latest year for which IRS statistics of income data are available), the total adjusted gross income reported by the more than 140 million U.S. income tax filers amounted to $7.626 trillion.

In other words, “adjustments” took approximately $1.6 trillion off the table, out of the base from which income tax could be collected. These “adjustments” may be socially desirable (or not), but to discuss income tax rates without reference to this “off the table” money is, at best, shortsighted and, at worst, a cynical ploy to protect sacred cows.

But “adjustments” are only the start of the conversation.

The IRS reported that of the 140.5 million income tax returns received, only 81.9 million had taxable income.

Moving from adjusted gross income to taxable income took 58.6 returns and nearly $2.8 trillion off the table. This amounted to about 42 percent of the returns and 30 percent of total income moving “off the table.”

The total income tax paid by the 81.9 million filers with taxable income came to just less than $866 billion.

This amounted to an average per-return of approximately $10,600. But this overall average covers a very progressive range that ran from $131 for the 40,000 returns with taxable income between $1 and $5,000 to $6.6 million for the 8,200 filers who reported taxable income of more than $10 million.

Tax collected as a percentage of taxable income amount to 18 percent. As a share of adjusted gross income, it amounts to 11 percent. As a share of total income, it amounts to 9 percent.

In other words, the total amount of adjustments, credits and other provisions that create the differences between total income, adjusted income and taxable income are enough to cut the effective rate of the federal income tax in half.

Of course, the effect of putting all these exclusions back “on the table” would not be to cut everyone’s tax bill in half. Some would pay much more, and others would pay much less. And therein lies my first answer to the question, “What would you do to effect structural reform?”

I would put the $4.4 trillion back on the table and make a list of who benefits from each exclusion. Then I’d start comparing those benefits to putting Medicare on a fiscally sustainable foundation, improving our systems of education and health care, leaving more money in the pockets of those who earn this income.

Structural reform can be achieved only by understanding the nature of our current structure. And I can think of no better place to look for that understanding than in a shuffling through the $4.4 trillion in income we now exclude from the income tax system.

Charles Lawton is senior economist for Planning Decisions, a public policy research firm. He can be reached at:

clawton@maine.rr.com